Jatinder
Nath Vs. M/S Chopra Land Developers Pvt. Ltd. & Anr [2007] Insc 238 (2 March 2007)
S. H. Kapadia & B. Sudershan Reddy
Arising out of SLP (C) No. 11815/06 KAPADIA, J.
Leave granted.
This civil appeal arises from the final order dated 19.4.2006 passed by the
High Court of Punjab and Haryana at Chandigarh allowing Civil Revision No.
4877/96.
The short question which arises for determination in this civil appeal is
whether the Additional Civil Judge (Senior Division), Faridabad was right in
dismissing the application filed under section 14 of the Arbitration Act, 1940
(for short "the Act") filed by M/s Chopra Land Developers Pvt. Ltd.
("the Developer") on the basis of Award dated 29.3.1994 given by
the Arbitrator in the above court for want of jurisdiction.
The Developer is a private limited company having its registered office at
Saket, New Delhi. On 16.3.1990 an Agreement was entered into by the Developer
with one Jatinder Nath (appellant herein). At that time, the appellant was
residing at Faridabad. Under the above agreement, the Developer agreed to
construct a housing complex on a plot bearing No.
G-13, Saket, New Delhi. Under the said Agreement, the Developer agreed to
finance the construction from its own resources. Clauses 11, 20 and 21 of the
said agreement read as follows:
"11. In case of any dispute arising between the parties in this
respect, the matter shall be referred to the Sole Arbitrator for his valuable
decision and his decision shall be final and binding on both the parties.
20. That in case of any dispute arising between the parties in respect of
these presents, the same shall be referred for arbitration to the sole
Arbitrator.
Shri Damodar Sharma, 5-N/35, NIT Faridabad shall be the sole Arbitrator and
the decision shall be binding on both the parties.
21. The agreement has been entered into between the parties at Faridabad and
the Faridabad Courts only shall have the jurisdiction in case of any dispute
between the parties to the said agreement."
In terms of the said agreement, when the dispute arose between the parties,
the appellant herein requested for a reference to the named Arbitrator. This
was vide letter dated 20.8.1992. The Arbitrator entered upon the reference on
24.8.1992. He fixed the hearing on 5.9.1992 on which date the appellant
remained present at the venue of arbitration. However, neither the arbitrator
nor the Developer was present. Suddenly after fourteen months, the arbitrator
purported to act. He fixed the matter for hearing on 20.2.1994. Since the
entire matter was pending before the Delhi High Court which was moved by the
appellant herein under section 20, the arbitrator was requested not to proceed.
Despite the request, the arbitrator proceeded to give his Award (ex parte).
This was on 29.3.1994.
To complete the chronology of events, it may be pointed out that the
Developer (first respondent herein) filed an application under section 14 of
the Act for filing the Award in the court of Additional Civil Judge (Sr. Div.),
Faridabad (for short "the trial court"). Notice of the said
application was also given to the appellant herein. The appellant herein
appeared and filed his objections. He objected to the jurisdiction of the trial
court. According to the appellant, the suit land stood located in Saket, New
Delhi and, therefore, the trial court had no jurisdiction to pass the decree
in terms of the said Award. This was the basic objection raised by the
appellant before us. Apart from his objection on territorial jurisdiction, the
appellant also submitted before the trial court that the Arbitrator had issued
notice dated 24.8.1992 fixing the date of hearing on 5.9.1992. However, when
his advocate reached the residence of the Arbitrator on the date fixed, neither
the Arbitrator nor the Developer had turned up. The appellant also contended
before the trial court that the Award was not made within the period of four
months from entering upon the reference and, therefore, the Arbitrator had
become functus officio. He further pointed out to the trial court that an application
under section 20 of the Act has also been filed in the High Court by him for
filing the arbitration agreement in court. The appellant submitted that despite
raising the above objections before the Artbitrator, the Arbitrator proceeded
to pass an ex parte Award dated 29.3.1994. The appellant further pointed out
that the Developer had filed a suit for permanent injunction in the Court of
Senior Sub-Judge, Delhi and that the Developer had sought intervention of the
civil court for adjudication of the dispute and, in the circumstances, the
Arbitrator could not have made an ex parte Award dated 29.3.1994.
According to the appellant, the said ex parte Award passed by the Arbitrator
was in violation of the provisions of the Act; that it was non est, and, therefore,
the same could not be made rule of the Court.
The trial court on the basis of the above pleadings framed several issues.
Two of the six issues were, whether Award dated 29.3.1994 was non est as the
Arbitrator had become functus officio and whether the trial court had no
territorial jurisdiction to entertain the matter since the suit lands are
located in Saket, New Delhi.
By impugned judgment dated 24.9.1996, the trial court held that in view of
section 31(4) of the Act, since the land in question stood located in Saket,
New Delhi and since the appellant herein is the resident of Delhi and since the
Developer was carrying on business in Delhi the trial court had no territorial
jurisdiction to pass the decree in terms of the Award. The trial court rejected
the contention of the Developer that the subject matter of the reference was
the contract between the parties; that under the contract, the dispute, if any,
was to be referred for arbitration in Faridabad; that under the contract, the
dispute was referable to the sole arbitrator whose decision was to bind both
the parties. The trial court also rejected the contention of the Developer that
the agreement was entered into between the parties at Faridabad and that the Faridabad
court alone had the jurisdiction to decide the above dispute. The trial court
also rejected the contention of the Developer that on the date of execution of
the agreement, the appellant herein was residing in Faridabad. On the merits of
the case, the trial court found that the appellant herein had moved a petition
under section 20 of the Act on 14.10.1993 in the Delhi High Court which was
registered as Suit No.
2482/93 wherein it was prayed that an independent arbitrator be appointed
and the matter be referred for arbitration. On 14.10.1993 the Arbitrator had
not made the award. On 14.10.1993 the period of four months had expired.
The trial court found that after the institution of petition under section
20 of the Act on 14.10.1993, the arbitrator, suddenly, after a lapse of almost
fourteen months from the date of his entering upon the reference, made an ex
parte Award against the appellant on 29.3.1994. According to the trial court,
though the agreement (Ex. P-1) stood executed at Faridabad, the validity of
that agreement and the dispute arising therefrom have to be decided in the
civil court at Delhi since the property in question stood located in Saket, New
Delhi. According to the trial court, the Developer had moved an application
under section 14 of the Act on 12.4.1994, by that application, the Developer
sought a decree from the trial court at Faridabad in terms of the ex parte
Award. On 12.4.1994, according to the trial court, the appellant herein was
residing in Delhi, he was served with the summons at his residential address in
Delhi coupled with the fact that the suit property was in Delhi and, therefore,
the trial court at Faridabad had no territorial jurisdiction to entertain and
try the Developer's application under section 14 of the Act. According to the
trial court, there was one more reason for saying that it had no territorial
jurisdiction. According to the trial court the agreement (Ex. P-1), pertained
to immovable property at Saket and when a dispute arose between the parties,
the appellant herein had moved the Delhi High Court under section 20 of the Act
in which the address of the appellant was shown as G-13, Saket, New Delhi. The
trial court also look into account one more circumstance, namely, that the
Developer had instituted Civil Suit No. 945/92 against the appellant herein. In
that suit, the Developer had asked for a decree for permanent injunction. In
that suit the appellant herein was the defendant. In that suit, the address of
the appellant as defendant was also shown as G-13, Saket, New Delhi. In the
circumstances, the trial court held that the Developer had invoked the
territorial jurisdiction of the Delhi High Court much prior to his application
under section 14 of the Act to the trial court herein on 12.4.1994. In the
circumstances, the trial court held that the proviso to section 16 CPC was not
applicable and that the application filed by the Developer under section 14 of
the Act dated 12.4.1994 should have been instituted in the Delhi Court within
the local limits of whose jurisdiction the suit property stood located. In the
circumstances, it was held by the trial court that clause 21 of the agreement
conferring jurisdiction to the Faridabad court cannot be implemented. The trial
court observed that since the appellant had moved the Delhi High Court under
section 20 of the Act for appointment of a new arbitrator in the year 1993 and
since that application was prior to 12.4.1994 and since that application was
anterior to the reference, the appellant's application under section 20 of the
Act fell within the purview of section 31(4) of the Act. According to the trial
court, since a petition under section 20 of the Act was pending prior to
12.4.1994 in the Delhi High Court, the Developer should have moved his
application under section 14 also before the Delhi High Court. In this
connection reliance was placed on the judgment of this court in the case of
Union of India v. Surjeet Singh Atwal reported in AIR 1970 SC 189. Aggrieved by
decision of the trial court dated 24.9.1996, the Developer moved the Delhi High
Court by way of the CRA. In the CRA the Developer contended that under the
agreement (Ex. P-1) vide clause 21 it was agreed between the parties that the
Faridabad courts alone shall have the jurisdiction in case of any dispute
between the parties and, therefore, the trial court had territorial
jurisdiction to entertain and try application dated 12.4.1994 under section 14
of the Act. It was contended, in the alternative, that where two courts have
concurrent jurisdiction, the parties by agreement can choose the jurisdiction
of one of them and such a choice was not against the public policy. It was
contended that an agreement whereby jurisdiction of the court stood specified
was not contrary to section 28 of the Contract Act and to the public policy. It
was further contended that where two courts had territorial jurisdiction to try
a case, it is open to the parties to enter into an agreement whereby
jurisdiction of the court stood specified. On behalf of the Developer it was
further contended that, at the time of execution of the agreement (Ex.
P-1) the appellant herein resided at Faridabad and his subsequent change of
address cannot change clause 21 of the agreement. It was further urged on
behalf of the Developer that an application under section 20 of the Act was
filed by the appellant herein in the Delhi High Court and it had no relevance
with clause 21 of Ex. P-1. According to the Developer, filing of such suit
under section 20 of the Act before the Delhi High Court cannot alter the terms
of Ex. P-1. It was further urged on behalf of the Developer that it had
instituted the above suit for permanent injunction in the Delhi High Court.
That suit was Suit No. 945/92 for permanent injunction which was for a
relief which had no correlation with the arbitration matter. Moreover, that
suit was for permanent injunction. Such a suit could have been filed in Delhi
courts alone as in that suit it was alleged that the appellant herein was
attempting to interfere with the Developer's possession. Such a suit did not
constitute a waiver. On behalf of the Developer, it was further urged that the
trial court had erred in coming to the conclusion that Ex. P-1 cannot be given
effect as the suit property was located at Saket, NewDelhi and that the parties
were residing at Delhi.
On behalf of the appellant herein, it was sought to be argued before the
High Court that although Ex. P-1 was executed at Faridabad and although at the
relevant time the appellant resided in Faridabad, the dispute was in connection
with recovery of possession and, therefore, the civil court at Faridabad had no
jurisdiction to entertain, try and dispose of the Developer's application under
section 14 of the Act. It was also urged that subsequently the appellant had
shifted his residence from Faridabad to Saket in New Delhi and, therefore, the
trial court was right in refusing to entertain the Developer's application
dated 12.4.1994 under section 14 of the Act.
Accordingly, on behalf of the appellant herein it was urged that no
interference is called for in the CRA.
By the impugned judgment, the High Court held that Delhi High Court was not
a competent court as the parties had chosen to confer exclusive jurisdiction
upon the Faridabad court. In the circumstances, section 31(4) of the Act was
not applicable. The High Court further held that there was no waiver on the
part of the Developer by invocation of the jurisdiction of the Delhi court when
the respondent instituted Suit No.
945/92 for permanent injunction. The High Court held that Suit No. 945/92
had no correlation with the arbitration matter. The High Court further held,
that on the facts and circumstances of the present case, section 20 CPC was
applicable; that section 20 CPC refers to institution of suits other than those
covered by section 16 CPC on the basis of residence of defendant or cause of
action. In the circumstances, the High Court allowed the Revision Petition
holding, that the trial court at Faridabad had jurisdiction to entertain and
try application dated 12.4.1994 under section 14 of the Act; that section 31(4)
of the Act was not attracted; that the arbitrator had entered upon reference on
the application of appellant herein and, therefore, there was no occasion for
the appellant moving the Delhi High Court under section 20 CPC seeking reference.
Hence this civil appeal.
As stated above, the short point which arises for determination in this
civil appeal is whether application dated 12.4.1994 filed by the Developer in
the trial court at Faridabad was maintainable.
At this stage, it may be mentioned that the trial court at Faridabad
following the impugned judgment of the High Court had dismissed the objections
of the appellant herein and it has made said Award dated 29.3.1994 the rule of
the court. This was on 31.5.2006. On 23.1.2007 the Developer's Suit No. 945/92
for permanent injunction stood dismissed in default.
The basic point which needs to be decided by us is whether clause 21 of
Agreement dated 16.3.1990 (Ex. P-1) conferring jurisdiction on the Faridabad
court was ineffective and whether the appellant is right in his contention that
the application made by the Developer under section 14 of the Act was not
maintainable in the Faridabad court on the ground of lack of territorial
jurisdiction.
Mr. Sunil Gupta, learned senior counsel appearing on behalf of the appellant
submitted that the Award made by the arbitrator dated 29.3.1994 being an ex
parte Award was non est as it was passed after expiry of four months from the
date when the arbitrator entered upon the reference. He contended that on
20.8.1992 the appellant had referred the dispute to the arbitrator. On
24.8.1992 the arbitrator entered upon the reference and fixed the date of
hearing on 5.9.1992 on which date the appellant was present. On that date
neither the arbitrator nor the Developer was present. On that date, the
appellant herein sought the next date of hearing. Despite the telegram seeking
the next date of hearing, the arbitrator did not respond. During the period
October, 1992 and November, 1992 disputes arose when the MCD had issued notices
directing the appellant herein to show cause why the building plan submitted by
the Developer should not be revoked. Learned counsel pointed out that on
15.10.1992 the Developer had in fact instituted Suit No. 945/92 in the civil court
at Delhi for permanent injunction. In that suit, vide para 16, the Developer
had invoked jurisdiction of the Delhi court.
In the circumstances, it was not open to the Developer to move the trial
court at Faridabad on 12.4.1994 under section 14 of the Act. Learned counsel
urged that both the parties were aware that the dispute was in respect of the
suit property located at Saket in New Delhi. The dispute, according to the
learned counsel, was for possession of the suit property. The appellant herein
had sought possession of the suit property even before the arbitrator. The
Award of the arbitrator, according to the learned counsel, itself indicates
that the arbitrator has given relief in favour of the Developer concerning
immovable property and, therefore, the trial court was right in coming to the
conclusion that the application made on 12.4.1994 under section 14 by the
Developer was not maintainable on the ground of territorial jurisdiction in
view of section 31(4) of the Act. The second contention advanced on behalf of
the appellant before us was that the impugned Award dated 29.3.1994 was non
est. According to the learned counsel, four months time available to the
arbitrator under clause 3 of Schedule I read with section 3 of the Act expired
on 24.12.1992.After that date the arbitrator became functus officio.
In the circumstances, the appellant herein filed an application under
section 20 of the Act on 14.10.1993 before the Delhi High Court for appointment
of an arbitrator for adjudication of the dispute with the Developer. This
application was converted into Suit No. 2482/93. It is only thereafter that the
arbitrator suddenly purported to act as an arbitrator by fixing the date of
hearing on 20.2.1994 when the appellant herein requested the arbitrator in the
light of the above facts not to proceed with the arbitration proceedings since
the entire matter was before Delhi High Court in Suit No. 2482/93.
Despite the request made by the appellant, the arbitrator proceeded to make
an Award dated 29.3.1994 being an ex parte Award. Learned counsel further
pointed out that in fact prior to his application under section 20, M.C.D. had
revoked the sanction for construction of the complex and it was the appellant
herein who had filed a writ petition in the Delhi High Court being Writ
Petition No. 5038/93 against the revocation by M.C.D..
On the first question on the lack of territorial jurisdiction, we do not
find any merit in the contentions advanced on behalf of the appellant. We have
examined Ex. P-1 between the appellant and the builder (Developer) dated
16.3.1990. The agreement describes the appellant as the owner. It describes M/s
Chopra Land Development Pvt. Ltd. as the builder. Under the agreement, the
appellant remains the owner. Under the agreement, the appellant applies to
D.D.A. for time to construct a housing complex on a plot of land at Saket owned
by the appellant. Under the agreement, the Developer agrees to construct a
housing complex on the plot bearing No.
G-13, Saket, New Delhi. Under the agreement, the entire construction cost is
financed by the Developer. Under the agreement, the housing complex consisted
of basement, ground floor, mezzanine first floor, second floor and third floor.
Under the agreement, the Developer agreed to construct the housing complex
without prejudice to the owner's right. Under the agreement, the owner was
required to give permission to the builder to construct the housing complex.
Under the agreement, the entire cost of construction was to be borne by the
Developer. Under the agreement, the building plan, the completion certificate
etc. were to be signed by the appellant-owner. Under the agreement, vide clause
15, the Developer agreed to pay to the appellant-owner a sum of Rs. 5 lacs in
consideration of his seeking permission to construct the housing complex. This
was in addition to the construction cost to be incurred by the Developer.
Clause 16 of the agreement stated that in consideration of the Developer's
services to construct the housing complex, the appellant agrees to allow the
ownership of the basement, ground floor and mezzanine along with proportionate
interest in the land to be transferred in the name of the Developer. At this
stage, it may be noted that under the ex parte Award dated 29.3.1994 the
arbitrator has passed his Award in terms of para 16 and, therefore, it was
contended before us on behalf of the appellant that the dispute related to
possession of the property; that the dispute was comparable to a suit for land
and that the submission was made specifically in view of the Award being passed
in terms of para 16 of the agreement (Ex. P-1). It was urged that since the
arbitrator has passed the Award directing the appellant to transfer the
ownership of basement, ground floor, mezzanine along with the proportionate
interest in the land in favour of the Developer, the present dispute related to
recovery of possession and since the lands were located in Saket the trial
court had no jurisdiction to make the Award rule of the court under section 14
of the Act. As stated above, we do not find merit in the contention advanced on
behalf of the appellant. We have examined Ex. P-1 in entirety. Apart from the
above clauses of Ex. P-1, we have already quoted clauses 11, 20, and 21 by
which the parties agreed that in case of dispute between the parties the same
shall be referred for arbitration to the sole arbitrator at Faridabad and his
decision shall be binding on both the parties.
Under clause 21, the parties agreed that the Faridabad court alone shall
have the jurisdiction in case of any dispute between the parties. On our
examining the terms and conditions of Ex. P-1 along with the surrounding
circumstances thereto, we are of the view that Ex. P-1 was a pure Development
Agreement. The agreement is merely an agreement whereby a party agrees to
develop certain property for a certain consideration. Under the agreement, the
appellant herein continues to remain the owner. He has to apply for permission
to construct the building to the D.D.A.. The Developer agrees to construct on
the land. The Developer agrees to finance the entire construction cost and in
lieu of the Developer's services in the matter of construction of housing
complex the owner (appellant herein) agrees to permit transfer of the ownership
a part of the complex to the Developer. It is for this reason, as indicated by
the events enumerated above, that M.C.D.
had issued notice to the appellant on 21.9.1992 to show cause why the
building plan submitted should not be revoked. It is for the above reasons,
that M.C.D. ultimately revoked the sanction for the construction of the housing
complex on 18.5.1993 and it is the appellant herein as owner who had sought to
challenge the revocation vide Writ Petition No. 5038/93. On the facts of this
case, therefore, it cannot be said that the trial court at Faridabad had no
jurisdiction to make the Award the rule of the court under section 14 of the
Act. Section 31(1) of the Act provides that an Award may be filed in any court
having jurisdiction in the matter to which the reference relates. Under that
section, the Award can be filed in the court within whose jurisdiction the
property in dispute lies. Parties cannot give jurisdiction to a court under
section 14 by consent if that court does not has jurisdiction. If an award refers
to an immovable property, the court having jurisdiction in respect of the same
will entertain an application under section 14. In order to decide as to which
court has jurisdiction to entertain a petition under section 14, reference has
to be made to section 2(c) read with section 31(1) of the Act. Merely because
the arbitrator chooses to hold the proceedings in a place where no suit could
be instituted, and chooses to make an award at that place, it would not give
the court of that place territorial jurisdiction to decide the matter under the
Act. Section 30 refers to ground for setting aside an award. Section 30 is to
be read with section 33. The idea behind the entire scheme of the Arbitration Act
appears to be that an application by a party challenging the validity of
correctness of the award on whatever ground has to be made under section 33.
Section 33 is the only section under which a party is given the right to apply
to the court to challenge either the agreement or the award. Under the Act,
therefore, after the Award has been filed a party is permitted to make an
application under section 33 to bring all kinds of defects to the notice of the
court and the court will give reliefs either under section 15 or section 16 or
even under section 30 of the Act. In an arbitration without the intervention of
the court, an award can be filed in any court having jurisdiction in the matter
to which the reference relates.
The award can be filed only in the court which would have jurisdiction in
respect of the subject matter of the dispute. In order to decide the
jurisdiction of the court, it is necessary to decide whether the court would
have jurisdiction to try a regular suit between the parties in which the relief
is claimed. Section 33 does not prescribe the court before which an application
under this section may be filed, but section 31 makes such provision. Section
31(2) provides that all questions regarding the validity, effect or existence of
an award or an arbitration agreement shall be decided by the court in which the
award has been filed or may be filed. Section 2(c) lays down the forum.
The application has to be moved in the court within whose jurisdiction the
opposite party resides or carries on business or within whose jurisdiction any
part of the cause of action arises. Residence or carrying on business of a
party, apart from the place of accrual of a cause of action is relevant for
determining the territorial jurisdiction of the court in arbitration cases, if
the question so arises in connection with the subject matter of the dispute.
Applying the above tests to the facts of the present case, we are of the
view that at the relevant time the appellant resided at Faridabad. He resided
at Faridabad when the contract was made. Under the contract, the parties agreed
to refer all disputes to the Faridabad court. Apart from the residence, we are
also concerned with the place of accrual of the cause of action. In the present
case, a bare reading of the agreement indicates that it is an agreement to
develop. The appellant remains the owner, the Developer remains the contractor.
The Developer is the financer. The appellant is the owner of an asset. The
contractor/ Developer agrees to exploit that asset on behalf of the owner. The
Developer funds the scheme. The building plans remained in the name of the
owner. The D.D.A. informs the owner regarding revocation of the building plan.
The owner files the writ petition challenging the revocation. The contractor is
paid consideration in terms of a part of the property. In the circumstances, it
cannot be said that this case is similar to a suit for land. One cannot look at
para 16 alone in isolation. On the other hand, with open eyes, the parties had entered
into the contract, they had agreed to refer all disputes to an arbitrator at
Faridabad and they had agreed that the Faridabad court alone shall have
jurisdiction. In a matter of this kind, it cannot be said that the claim is
similar to a suit for land. A housing complex has to be constructed at the
site. When dispute arises, it will not be confined only to immovable property.
Such disputes also require accounts to be maintained. The disputes also involve
rendition of accounts. In the circumstances, in our view, section 20 CPC alone
is attracted. Therefore, in our view, the High Court was right in holding that
the Faridabad court had jurisdiction to make the Award the rule of the court.
As stated above, one of the points raised on behalf of the appellant herein
is that ex parte Award dated 29.3.1994 was non est since it was made beyond
four months from the date when the arbitrator entered upon the reference. We do
not find any merit in this contention. Chapter II of the Arbitration Act
covers references, in which the parties may proceed, if nothing goes wrong, up
to the stage of delivery of the award, without the intervention of the court.
This does not mean that the court has no authority to intervene at an early
stage, should it become necessary. In the present case, as stated above, the
arbitrator entered upon a reference pursuant to the notice given by the
appellant on 24.8.1992. The notice was given on 20.8.1992. Therefore, section 8
of the Act has no application. Section 8 applies only where the parties do not
concur in the appointment. Section 8 and section 20 operate in different
provinces. Section 20 confers power on the court to order the agreement to be
filed and to make an order of reference to the arbitrator appointed by the
parties or where they do not agree, the court can appoint any other person of
its choice as an arbitrator. This discussion is important. This difference
between section 8 and section 20 shows that the reference flows from an
agreement between the parties in the cases falling under section 8. The
reference flows from the agreement in cases falling under Chapter II of the Arbitration Act
and as long as the agreement stands, the reference remains valid unless it is
superseded by an order of the court under section 19. Under that section, where
award becomes void under section 16(3) or where an award is set aside, the
court may by an order supersede the reference and shall thereupon order that
the arbitration agreement shall cease to have effect. Therefore, till such time
as the order is passed by the court under section 19 superseding the reference,
the same shall remain valid till the agreement is superseded. This is the scope
of section 8 read with section 19 of the Act. On the other hand, in cases
falling under section 20 of the Act, power is conferred on the court to make an
order of reference to the arbitrator. That power is conferred on the court
which orders the agreement to be filed before it. In a proceeding under section
8, disputes are presented by the parties before the arbitrator. Whereas in
proceedings under section 20, the disputes are referred by the court. It is for
this reason that it has been repeatedly held that merely because an arbitrator
does not make an award within the specified period of four months the court has
the power to extend the period. The award given by an arbitrator after four
months is not binding on the parties. Such an award is vitiated as the
arbitrator has no power to make an award after four months.
However, a bare failure of an arbitrator to make an award within the time
allowed by law will not involve the consequences of it being set aside only on
that ground. The court has ample powers in a given case to extend the time and
give life to the vitiated award by exercising judicial discretion under section
28 of the Act. An application to have the award set aside on the ground that it
was made beyond time prescribed has to be moved under the Act. No separate suit
would lie for that purpose. Section 28 is not limited only to references to
arbitration made in a suit pending before the court.
Further, the power given to the court under section 28 is so wide that it
can extend the time even if the award is made beyond four months from the date
of the arbitrator entering upon the reference. The only restriction is that it
must be exercised with judicial discretion. In the present case, as state
above, the Developer moved an application for making the award the rule of the
court on 12.4.1994. Unfortunately, the appellant chose not to appear before the
trial court. In the circumstances, an ex parte decree came to be passed on
31.5.2006. We have used the word unfortunately because the appellant herein had
filed his objections before the trial court. Those objections were dismissed as
he chose to remain absent. The appellant chose to remain absent as he had moved
or decided to move this Court in special leave petition against the impugned
judgment of the High Court on the point of territorial jurisdiction. The
judgment of the High Court is dated 19.4.2006.
The Award is made the rule of the court by the trial court on 31.5.2006 in
view of the impugned judgment of the High Court. We have also gone through the
Award. We do not wish to express any opinion on the merits, however, the fact
remains that the arbitrator entered upon the reference on 24.8.1992. He fixed
the date of hearing on 5.9.1992. On 5.9.1992 the appellant appeared before him.
The arbitrator was absent. The Award has been given almost after fourteen
months and that too after 14.10.1993 when the appellant herein moved an
application under section 20 of the Act for appointment of a new arbitrator.
Taking into account the above circumstances, we set aside the ex parte Order
dated 31.5.2006 passed by the trial court at Faridabad making Award dated
29.3.1994 the rule of the court.
Consequently, we direct restoration of the matter to the file of the Court
of Additional Civil Judge (Senior Division), Faridabad in Case No. 7 instituted
on 12.4.1994 titled M/s Chopra Land Developers Pvt. Ltd. v. Jatinder Nath and
anr.. We may clarify that the trial court will proceed on the basis that it has
territorial jurisdiction to decide the application made by the Developer under
sections 14 to 17 of the Act. The said application will be decided on merits
alone in accordance with law. In other words, the trial court will re-examine
the question on merits as to whether the Award given by the arbitrator on
29.3.1994 should or should not be made the rule of the court. The trial court
will have to decide whether to extend the period for making the Award or not,
whether to supercede the reference or not. The trial court will proceed in accordance
with law. Any observation on the merits of the case mentioned hereinabove shall
not be treated as opinion of this Court. Further, the trial court will proceed
on the basis that it has territorial jurisdiction to decide the above matter.
Subject to above, the civil appeal is dismissed with no order as to costs.
Back
Pages: 1 2